Free factsheet: EIS at a glance

Seed Enterprise Investment Scheme

SEIS in a nutshell

Help start-up companies get off the ground and for every £1 you invest, save up to 64p in income and capital gains tax. You also qualify for IHT exemption, potentially saving up to another 40p per £1 you invest.

Deepbridge Life Sciences SEIS

The UK has a proud history of discovery, innovation and development in life sciences, from the discovery of penicillin through to the more recent and world-leading 100,000 Genomes project. Life sciences are vital for the UK economy, providing almost half a million jobs and annual turnover of £70 billion. The government is keen to support UK life sciences: in August 2017 it announced a funding package of £160 million for the sector.

The Deepbridge Life Sciences SEIS – now in its fourth iteration – aims to capitalise on the UK’s strength in life sciences and the government’s commitment to it. The intention is to provide UK science and technology start-ups with private capital to supplement government grants. Investors can expect a portfolio of around ten companies developing a disruptive technology or scientific breakthrough in biopharmaceuticals, biotechnology or medical technology with the potential to develop a new market or replace existing solutions in an established market.

Like all SEIS offers this is very high risk and investors should expect failures. However, for those prepared to take the risk, this offer could be a compelling way to access high-growth businesses at a very early stage.

Highlights

Portfolio of up to ten early stage science or technology-based companies

Potential to attract government and regional grants and matched funding

Each investee company will have strong intellectual property and must demonstrate scalability

Target return of 2.5x money invested after 5-7 years (net of fees), returns not guaranteed

Pay no initial charge through Wealth Club

Minimum investment £10,000

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.

Read important documents and apply

The manager

Deepbridge Capital brings together over 200 years of combined scientific and commercial experience.

It was set up by Ian Warwick in 2010. He started his career in the Royal Navy, then became an oil engineer in Houston and worked for one of the biggest printer companies before settling on technology start-ups in New York. When he founded Deepbridge, Mr Warwick didn’t have experience of managing money but he and his founding partners all had experience in technology and in floating businesses.

The Deepbridge Life Sciences Team, headed by Dr Savvas Neophytou, is responsible for selecting, establishing and managing the Life Sciences SEIS. Dr Neophytou worked in the City for 15 years as an investment banker at JP Morgan, Bear Stearns, Shore Capital, Cantor Fitzgerald and Panmure Gordon. He holds a PhD in psychopharmacology and a degree in pharmacology.

His team is monitored by the Supervisory Investment Committee. The seven-strong committee has a very strong pedigree.

Professor Nagy Habib for instance pioneered novel clinical trials for the treatment of cancer and was named one of Britain’s top surgeons by the Times in 2011. Lloyd Price co-founded Zesty in 2012 and three years later his business was selected as 1 of the UK’s 30 finest early stage technology businesses. In 2016, he was voted one of the most influential people in HealthTech globally.

Professor Chris Wood, who acts as the Senior Medical Adviser on the committee, founded and exited two biotech companies including Bioenvision which sold for $345 million after seven years. Chris is a fellow of the Royal College of Physicians & Surgeons of Edinburgh.

Strategy

Investors will hold a portfolio of up to ten SEIS-qualifying companies. The first three iterations of Deepbridge’s Life Science SEIS portfolio have each invested in 11 to 12 companies with a focus on life sciences and medical device technology.

Deepbridge believes a dearth in traditional sources of funding in recent times alongside demand from large pharmaceutical businesses for new drug treatments means there are plenty of opportunities for private investors.

Intellectual Property (IP) is a vital component of investment. In a recent Life Sciences report from BDO, IP was described as the ‘X factor.’ Prior to investment, Deepbridge must be satisfied each company possesses strong IP, has a scalable proposition and not need too much capital to develop the business and possibly take them through to Phase 1 Clinical trials.

Deepbridge will take an active executive role on the Board of the investee companies. Deepbridge will also encourage the investee companies to seek funding from regional development funds and government grants. An investment of £100,000 for instance might be matched by a grant of £100,000. The company therefore has £200,000 of capital to deploy but an investor has only invested £70,000 (net of tax reliefs). Leverage of this nature doesn’t carry the same risks as bank debt or private loans. Please note, there is no guarantee the investee firms can attract these grants. Tax benefits depend on circumstances and tax rules can change.

Deals are sourced from a wide network of formal and informal relationships and from members of the Deepbridge partnership board. Examples of academic institutions Deepbridge have ties with include Imperial College London, University of Liverpool and the Daresbury Sci-Tech science campus.

In theory, Deepbridge should be able to participate at low valuations as these are such early stage firms and there is potentially a shortage of capital available to them. Deepbridge’s investment criteria give them a good chance of identifying potential winners – but even so, investors should anticipate failures in the portfolio. Understanding a company’s potential at such a youthful stage of development is no mean feat.

Exit strategy

Deepbridge anticipates the majority of exits to be achieved by a trade sale, an IPO or a liquidation, although there are no guarantees. Given the nature of the sector a trade sale to a larger rival seems the most likely option of the three. Deepbridge encourages their investee companies to work with multi-nationals in distribution deals. Part of the driver for this is the hope they can make potentially profitable connections.

Due to the recent launch of the Deepbridge Life Sciences SEIS, no exits have yet been achieved to date: it only began investing in 2016.

Target return

Deepbridge targets a return of 2.5x money invested (not guaranteed) excluding all tax reliefs, after a period of five to seven years. This is an ambitious target, and the risk of failure is high.

Portfolio company examples

Previous portfolios of this SEIS fund have invested in 34 companies. To give investors a flavour of what to expect, three examples from the first SEIS tranche which closed in 2016 are shown below.

Renephra Ltd

Renephra Ltd is a UK based medical device development company that has developed and patented technology that addresses the significant ongoing medical problems associated with treatment resistance of fluid overload within the body. Health issues often associated with fluid retention include heart failure and chronic oedema / lymphoedema in vascular oncology alongside other impacting and personally debilitating diseases. Renephra’s medical device removes excess fluid from the body by removing it from the skin. It uses microneedles to access fluid located in epidermis/dermis and negative pressure to remove it.

Renephra will be the first medical company to use negative pressure to extract excess fluid via its patented device and know how. The product has the potential to vastly reduce the time (in days) a patient spends in hospital with fluid retention health problems thereby saving the NHS potentially millions annually. Patients can self-administer the treatment safely in their home. Renephra estimates the global market is £1bn.

In March 2018, Deepbridge Capital and Catapult Ventures provided an additional investment of £231,000 raised through EIS.

Stent Tek

Stent Tek is developing a novel catheter system that enables patients to receive haemodialysis (HD), specifically for kidney failure, in an improved manner. Currently, patients receiving HD must undergo a surgical procedure to create a surgical connection between an artery and a vein, the vein then acts as a ‘vascular access’ through which a dialysis machine is connected. The surgical connection between the vein and artery is known as an ‘arteriovenous fistula’. At present, there are more than 2.5 million patients world-wide who require HD due to renal failure. Fistulas, whilst an established technology, are unreliable often blocking up and requiring repeated costly repair operations. In short, the patient’s life is dependent upon dialysis, and the dialysis is dependent upon a fully functioning fistula.

Stent Tek has developed a minimally invasive procedure that uses a ‘stent graft’ (in effect, a synthetic tube) to form the fistula which is then inserted using a proprietary technology named ePATH), a process that is significantly less traumatic than surgery. The resulting fistula is ready in a shorter timeframe and less likely to fail, thus resulting in fewer patients suffering secondary infection and potentially life-threatening medical complications.

There are opportunities for the company in direct sales of the ePATH device, direct sales of the proprietary stent grafts, licensing of intellectual property; and the sale of a defined list of peripherals and replacement parts.

Within the UK, a total of 17,000 people receive HD for kidney failure, with 5,500 people per year starting treatment for kidney failure, of which 40% receive HD.

Since providing the company with inital seed investment in 2016, Deepbridge Capital has participated in a second fundraising round, through EIS. This investment should help the company move toward regulatory apporval and first in-man data.

Aurio

Aurio has come up with a patented core technology that potentially eases the effects of Tinnitus. Tinnitus is a perception of sound in the absence of an external source. Although it is often referred to as ‘ringing in the ears’, tinnitus can also be perceived as many different sounds including hissing, clicking or whistling. A common condition, it affects approximately 1 in every 10 adults, especially those over the age of 60. Common causes are excessive or cumulative noise exposure, head and neck injuries, and ear infections. In a small number of individuals, tinnitus is a sign of a serious underlying medical condition. The adverse impacts of tinnitus include insomnia, poor concentration and performance, irritability, anxiety and depression.

There is currently no cure for tinnitus. The development of ‘Aurio Soundscapes’ enables sufferers to more effectively manage their condition and thereby improve their quality of life. The Aurio technology currently runs on iOS mobile devices, and the underlying algorithms that manage the individual’s unique sets of ‘brown’, ‘pink’ and ‘white’ noise are fully controllable and customisable by the user.

According to Aurio, the immediate reachable market for Aurio Soundscapes is estimated at 49 million across the USA, UK and Canada – with further potential worldwide.

Bioenvision

Other evidence of Deepbridge’s wider skills can also be seen in the case of Bioenvision - note this is not an investment held by the fund but it was a firm founded by Professor Chris Wood who sits on the supervisory investment committee. Bioenvision was set up in 2000 with the mission of developing new treatments for cancer. Seven years later, Bioenvision was acquired by Genzyme Corporation for $345 million. Bioenvision identified and licensed compounds from universities which had significant potential. Product approval was gained in the US and Europe. Genzyme Corporation bought the company primarily to gain exclusive rights to clofarabine, a cancer treatment for children.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.

EIS / SEIS investments are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.

Tax rules can change and benefits depend on circumstances.

This EIS / SEIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio.

Fees & charges

Full initial charge

2%

Wealth Club initial saving

2%

Net initial charge through Wealth Club

0%

Annual maintenance charge

2%

Performance fee

20%

More detail on the charges

When you invest via Wealth Club, you pay no initial fees from the subscription, so you should receive tax relief on the full amount. Wealth Club will receive initial commission (3%) and trail commission (0%) on the sale – however this comes out of Deepbridge’s fees so there is no additional charge to you. Deepbridge fees are paid by the investee companies. The underlying investee companies will pay a corporate advisory and arrangement fee of up to 5% to Deepbridge plus an annual maintenance charge of 2%.

In addition, there is a dealing fee of 0.65% for sales and purchases charged to underlying investee companies and a 0.5% per annum custody fee.

There is performance fee equivalent to 20% of the profit from each individual company with a minimum hurdle of £1.50 per £1 invested prior to any performance fee being applicable. VAT is charged where applicable. Deepbridge and Enterprise IP, the manager, retain the right to charge additional fees to investee companies to meet costs relating to future fundraising, marketing and administration.

Please see the provider's documents, including the key information document, for more details on the total fees and charges.

Your browser does not have JavaScript enabled; please call or email us for details of this example of charges.

Summary

The Life Sciences sector is an exciting one, especially in the UK. The Deepbridge Life Sciences SEIS offers an opportunity for wealthy and experienced investors to back the youngest companies in this cutting-edge sector, with the benefit of SEIS tax reliefs. Deepbridge has a highly experienced team with a good reputation – both on the investment team and the supervisory committee – which adds considerable strength to the offer and should help them identify and secure deals.

Read important documents and apply

Wealth Club aims to make it easier for
experienced investors to find information on – and apply for
– tax-efficient investments. You should base your investment decision on the
provider's documents and ensure you have read and fully understand them before
investing. This review is a marketing communication. It is not advice or a
personal or research recommendation to buy the investment mentioned. It does
not satisfy legal requirements promoting investment research independence and
is thus not subject to prohibitions on dealing ahead of its dissemination.

More about Seed Enterprise Investment Scheme

As a nation, we are pretty good at startups. The UK creates more “unicorns” than any other European country. A unicorn is a startup now valued at more than one billion dollars. Examples include Zoopla, ASOS, ...

The fund offers a mixture of new technology investments and follow-on funding into companies previously invested in by Jenson SEIS and EIS funds. HighlightsTarget return of 185p per 100p invested (not guaranteed)Choice of SEIS or EIS ...

You’ve probably had dealings with a robot recently. Whether it’s contacting your mobile phone provider, having an online order picked for you, or even getting a prescription dispensed from a pharmacy, chances are that a robot ...

The UK has a proud history of discovery, innovation and development in life sciences, from the discovery of penicillin through to the more recent and world-leading 100,000 Genomes project. Life sciences are vital for the UK ...

Free Resources

Company

Awards

Wealth Club Membership

When you request information from our website or register to receive news and alerts, you become a member of Wealth Club and will receive further information by post and/or email about our products and services. There are no costs or obligations attached to your membership and you can cancel it at any time by contacting us. Your personal data will remain confidential, and will never be passed to any other company, unless required by law.

Important Notice

This website is directed exclusively at, and intended to be used only by, persons in the UK who will be required to self-certify as Sophisticated Investors or High Net Worth Individuals before applying to invest in any of the products featured. It is not directed at any person where (by reason of nationality, residence, domicile or otherwise) the usage of the website is prohibited.

The investment products on this website are not for everyone. They are generally higher risk and require a longer investment term. You may get back less than you invest. It is therefore important that you understand the Risks and Commitments of these products.

We’ve made every effort to ensure the accuracy of the material on this website, but cannot guarantee its accuracy or currency. It reflects our understanding of current product and tax rules, which may change in future. It is for general information only and should not be regarded as constituting an offer or a solicitation to buy or sell any securities, or as investment or tax advice. If you are in any doubt as to the suitability of the products for your circumstances, please seek specialist financial or tax advice.

Wealth Club Limited is not responsible for the content of external third party material featured on our website.